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MRO potential remains a promise not fulfilled

Air Works India (Engineering) Pvt Ltd, an indigenous provider of aircraft maintainable services, posted a net loss of Rs 21.9 crore last year on rising operating expenses and finance costs. Vivek N Gour, CEO, Air Works India, tells FE’s Rhik Kundu that though the aircraft maintenance repair and overhaul (MRO) industry in India is worth $500-800 million annually, the government policy hasn’t encouraged setting up of MRO units here. Excerpts from the interview:

What are the major challenges the MRO industry faces in India?

In an industry that is globally competitive and has thin margins, Indian airlines often find it difficult to bear a 25% tax, i.e. 12% service tax and 13% royalty tax, on maintenance and repair overhauls. They prefer to fly 2,000-3,000 kms to an international destination for their yearly maintenance, instead. The MRO industry also requires hangers at airports. The government has been very reluctant to either build hangers or provide land to build hangers at airports. Also, it takes up to five days to get spare parts cleared from the customs, which is a major disadvantage in this industry. So, unless these fundamentals change, the potential for MRO in India will always remain a promise that is not fulfilled even though Indian airlines continue to place huge aircraft orders.

How big is your Indian operations and how do they compare with your overseas operations?

For our domestic operations, we have one hangar each in Mumbai and Delhi, which handle business jets and helicopters, while two hangars located at Hosur (Tamil Nadu) are used to service airlines. Apart from this we have presence in the UK, France, Dubai, and Slovakia. The heavy maintenance for aircraft other than Bell Helicopters, Bombardier aircraft and Hawker Beach planes are sent to our facilities abroad. While we employ 700 workers in India, we have employed about 450 staff abroad. We have over 200 clients, which include over 80 international airlines and 50 business jet owners.

What is your core business?

Our main business consists of servicing leased planes when they are returned to the financier on completion of the lease period. Before being given to another customer, the aircraft requires a heavy check/ maintenance. Air Works currently conducts heavy maintenance for three product lines–Bell helicopters, Bombardier aircraft, and Hawker Beach planes–in India. We also specialises in servicing aircraft like Boeing 737 series, Airbus A320 series, ATR and business jets of Dassault, Bombardier, Embrarer, Gulfstream and Augusta Westland.

What is your revenue distribution over your domestic and international operations like?

Four years ago, 100% of our revenue were from our domestic operations. Today, 65% of our revenue come from outside India.